The Impact of Information Asymmetry on Liquidity Basing on the MEM Model

Hua Guo () and Yang Liu
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Hua Guo: Tianjin University
Yang Liu: Nanjing XiaoZhuang University

Chapter Chapter 28 in The 19th International Conference on Industrial Engineering and Engineering Management, 2013, pp 263-269 from Springer

Abstract: Abstract Considering the characteristic of China stock market, we use the order imbalance index to measure the level of market’s information asymmetry, and apply the MEM model to depict the dynamic of liquidity. Basing on the SSE constituent index from 2010 high-frequency tick by tick transaction data, we research the impact of order imbalance; trading volume and volatility on liquidity from the perspectives of relative spread and market ask and bid depth. The result shows that market liquidity exhibits the feature of intensive aggregation, and is negatively correlated with market’s information asymmetry and volatility, but in positive correlation to trading volume.

Keywords: Aggregation; Liquidity; MEM; Order imbalance (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-642-38442-4_28

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DOI: 10.1007/978-3-642-38442-4_28

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